INTRODUCTION
Involuntary discharge from employment often
comes as a surprise to an employee. The question
that arises in such circumstances is whether the
employee has any legal recourse. Many employees
who believe that they were unfairly terminated
mistakenly assume that they have a right to
reinstatement, and a remedy for consequential
damages, including back pay. Whether such rights
and remedies exist often depends on how the
courts apply the well known but often-assailed
at-will employment doctrine or one of its
numerous exceptions.
The
at-will employment doctrine basically provides
that an employer may terminate an at-will
employee at any time, for a good reason, for a
bad reason, or for no reason at all. Wisconsin
has followed this general rule since the
nineteenth century case of Prentice v. Ledyard,
28 Wis 131 (1877). The logic is that unless
otherwise agreed, all employment is presumed to
be for an indefinite term, terminable at the
will or whim of either the employer or the
employee without advance notice. Each day
constitutes a new agreement, neither creating
rights nor duties from one party to the other.
There are
many exceptions, so numerous that they almost,
but not quite, swallow the rule. The exceptions
fall into several categories.
ANTI-DISCRIMINATION LAWS
Termination from employment is wrongful if it is
in violation of federal or state
anti-discrimination laws based on age, race,
creed, color, handicap, marital status, sex,
national origin, ancestry, arrest record,
conviction record, membership in the national
guard, state defense force or any reserve
component of the military forces, or use or
nonuse of lawful products off the employer's
premises during nonworking hours. See for
example, Title VII of the federal Civil Rights
Act of 1991, 42 U.S.C. 1981; the federal Age
Discrimination Employment Act, 29 U.S.C. 621;
the federal Americans with Disabilities Act, 42
U.S.C. 12111; and the Wisconsin Fair Employment
Act, Wis. Stats. Section 111.321-111.395. See
also statutes proscribing termination based on
an employee's union activities, National Labor
Relations Act, 29 U.S.C. 158 and Wis. Stats.
Section 111.06(1) (c)1; jury service, Wis.
Stats. Section 756.25(1); wage garnishment, Wis.
Stats. Section 812.235; refusal to submit to
honesty testing, Wis.Stats. Section 111.37(4);
being subpoenaed to testify at an OSHA
proceeding, Wis.Stats. Section 101.595; or
suffering a compensable worker's compensation
illness or injury, Wis. Stats. Section 102.35.
The
assertion that an employer wrongfully discharged
an employee because the employee made a worker's
compensation claim requires proof that the
employer, without reasonable cause, refused to
rehire an employee who was injured in the course
of employment, even though suitable employment
was available within the employee's work
restrictions. Such claims are usually quite
difficult. The employee must prove the
employment status at the time of the compensable
work-related injury, the loss of time from work
for any reason, an attempt to return to work, a
medical release to return to work with or
without restrictions, and the employer’s refusal
to rehire the employee because of the injury.
The employer has the burden of showing
reasonable cause for discharge or lack of
availability of suitable employment within the
employee’s restrictions. See Great Northern
Corp. v. LIRC, 189 Wis.2d 313, 525 N.W.2d 361
(Ct. App. 1994) (excessive absenteeism cannot
include time off for work-related injury); Ray
Hutson Chevrolet, Inc. v. LIRC, 186 Wis.2d 118,
519 N.W.2d 713 (Ct. App. 1994) (elimination of
job during disability period was justified);
Universal Foods Corp. v. LIRC, 161 Wis.2d 1, 467
N.W.2d 793 (Ct. App. 1991), cert. denied, 502
U.S. 921 (1992) (employer could not meet its
burden that employee was unable to do the work
and that no other suitable work was available).
Other case examples follow: Dalco Metal Products
v. LIRC, 142 Wis2d 595, 419 N.W.2d 292 (Ct. App.
1987) (Employee was injured, went to doctor,
returned to work without restrictions, and third
day later was fired allegedly for poor
production– court held for employee); Link
Industries, Inc. v. LIRC, 141 Wis.2d 551, 415
N.W.2d 574 (Ct. App. 1987)(Employee cut finger,
obtained bandage, went to emergency room,
returned to work next day, and took off the
following day to see personal doctor. Employee
was fired following day. Court held for
employee); West Allis School Distr. v. DILHR,
116 Wis.2d 410, 342 N.W.2d 415 (1984) (Back
injury. Prior to return to work, employer took
steps to lay employee off. Employer had no
intention of allowing employee to return to work
indefinitely. Less than one month after return
to work, employee was laid off permanently, and
replaced by new worker. Court held that lay-off
was in bad faith); L& H Wrecking Co. v. LIRC,
114 Wis.2d 504, 339 N.W.2d 344 (Ct. App. 1983)
(Back injury. Termination during healing period.
Firing based solely on existence of injury
without benefit of competent medical opinion
that injury would permanently prevent return to
work. Court held for employee).
A further
discussion of anti-discrimination laws is beyond
the scope of this essay.
GOVERNMENTAL EMPLOYEE LAWS
The law
governing termination from governmental
employment is different from the law governing
termination from private, non-governmental
employment. Certain constitutional and statutory
provisions create property rights to continued
employment that cannot be infringed without due
process of law. See Cleveland Bd. of Education
v. Loudermill, 470 U.S. 532 (1985); Board of
Regents v. Roth, 408 U.S. 564 (1972); Arneson v.
Jezwinski, 217 Wis.2d 288, 592 N.W.2d 606 (1999)
The
discussion will be limited to contract and tort
law. An outline of the law is provided so that
parties may consider their rights.
CONTRACT LAW
The
general principle underlying the employment
at-will doctrine allows no remedy to the
employee for discharge from employment. If the
general rule applies, and no exceptions apply,
the employer may terminate an employee with
impunity and without advance notice. Likewise,
an employee may quit the employment for any
reason and without notice. There is no remedy to
the aggrieved party in either case.
Despite
the existence, ubiquity and notoriety of the
general rule, there is much litigation regarding
wrongful discharge. Express contracts and
implied contracts can be created through
employment handbooks, company rules and policy
documents. When an employer assures the employee
that the employee is employed for a definite
period of time, the employee has grounds for a
wrongful discharge claim if prematurely fired
without "just cause." Likewise, if an employer
assures the employee that the employee will not
be discharged unless just cause exists, such as
violation of company policy or rules made
apparent to the employee, the employer may be
subject to a wrongful discharge cause of action
for arbitrary termination of the employee.
In Ferraro
v. Koelsch, 124 Wis. 2d 154, 368 N. W. 2d 666
(1985), the supreme court held that an employee
handbook could modify an at-will employment
relationship, and create a right to continued
employment indefinitely, in the absence of just
cause for discharge. The employee was hired as a
hotel security guard on an at-will basis, but
soon thereafter was asked by the hotel to sign a
statement in an employee handbook that spelled
out all the terms and conditions of employment,
including discharge procedures. The employee
handbook recited the policies and rules of the
employment and Ferraro's acceptance of those
regulations as a condition of his continued
employment. In addition, the handbook provided a
layoff procedure based on seniority;
distinctions between probationary and
non-probationary employees, including
disciplinary procedures; a progressive procedure
for discipline based on the number and
seriousness of rule violations; discharge only
for "just cause"; and a promise from Ferraro
that he would provide a two-week notice before
leaving the employment.
In this
case, the court held that the rules and
procedures to which both parties had agreed in
writing, and for which consideration was given,
created an express contract between the parties.
When Ferraro subsequently abused a hotel guest
for a parking violation, the hotel interviewed
the guest and other witnesses, determined that
there were grounds for discharge, and fired the
employee. Ferraro filed suit for wrongful
discharge. The supreme court ruled in favor of
the hotel, holding that although the handbook
constituted an express contract between the
parties that eliminated the at-will
relationship, there was no credible evidence to
show that the hotel breached that contract in
any way. The hotel had followed the discharge
procedure by performing an investigation of the
act and had just cause to discharge the
employee. This case is important for the
landmark holding that an employment handbook may
convert an employment at-will relationship into
one that can be terminated only by adherence to
contractual terms in the handbook.
Sometimes
an employer will provide behavioral guidelines
to employees that are presumed by some to create
express contracts for employment. These usually
are not enforced in court, however, unless the
employer creates specific rules or procedures
for discharge that create an agreed employment
relationship made conditional on those terms.
In Bantz
v. Montgomery Estates, Inc., 163 Wis.2d 973, 473
N.W.2d 506 (Ct. App. 1991), an employee claimed
that a handbook outlining regulations and
disciplinary procedures, an employee conduct
policy statement, and a manual prescribing a
schedule of progressive discipline converted an
employment-at-will relationship to a contractual
one that could not be terminated without just
cause. The employee was fired from her position
as cashier at a resort for allegedly failing to
report a miscount in change. The court of
appeals held that because the employer's written
publications were only "guidelines", and not
contractual promises, the at-will relationship
endured, and the discharge was not required to
be for just cause. Therefore, the employee had
no remedy even if the discharge was arbitrary
and capricious.
In Wolf v.
F & M Banks, 193 Wis. 2d 439, 534 N. W. 2d 877
(Ct. App. 1995), an employee sued for wrongful
discharge after he was fired for "poor
performance." Wolf claimed that his employment
had been converted from an at-will relationship
to one bound by the terms of a contract formed
through a code of ethics document presented to
him by the employer. According to the code, Wolf
was entitled to an explanation of any alleged
infraction. Wolf argued that this prevented him
from being fired at-will. The court disagreed.
The court ruled that an employer does not
abandon an at-will relationship simply because
an employee is given an explanation of subpar
performance and an opportunity to plead his
case. The court also noted that Wolf had signed
an agreement for an at-will employment
relationship and that the code included a clause
explicitly stating that no express or other
employment relationship or contract was created
through the document. There were no specific
rules or procedures, but rather, only guidelines
in the code, and no express conditions for
employment.
An implied
contract for continued employment in the absence
of just cause for discharge may be created by
the mutual intent of both parties. In Garvey v.
Buhler, 146 Wis2d. 281, 430 N.W. 2d 616 (Ct.
App. 1988), Garvey sued Open Pantry for wrongful
discharge on the basis of breach of implied
contract, created between Open Pantry and Garvey
through a combination of documents, including a
liquor sales policy, company rules, employee
manuals, and her understanding of a warning
policy. Garvey claimed that there was a pink
slip warning procedure providing that an
employee could be fired only after three pink
slips, and that she had not been afforded that
leniency. She also claimed that the employee
manuals and policy guidelines created an implied
contract that she could not be discharged
at-will. The court held that only the pink slip
procedure would have created an implied
contract, but the facts regarding the matter
were in dispute, so summary judgment was
inappropriate. No express contract were formed
through the handbooks or sales policies, but an
implied contract, if proven, would be just as
enforceable.
If the
fired employee cannot prove the existence of a
contract and its breach by circumstantial
evidence, the alternative approach is to argue a
violation of tort law.
TORT LAW
An
employer's violation of public policy in
terminating an employee may give rise to an
actionable wrongful discharge claim. The courts
will not allow an employer to fire an employee
for refusing to break the law. This can be
referred to as the public policy exception to
the at-will doctrine of employment. There have
been many cases where the court’s decision rests
on the definition of public policy and how it
pertains to the employment situation. Employees
may be awarded reinstatement and back pay if
they can show that they were discharged for
refusing to violate a public policy. However, as
explained in Brockmeyer v. Dun & Bradstreet, 113
Wis. 2d 561, 335 N. W. 2d 834 (1983), the public
policy in question must be well defined and
supported by statutory or constitutional law.
In
Brockmeyer, the court narrowed the scope of
public policy to existing law and decided that
wrongful discharge could not be based on a bad
faith claim. Brockmeyer was having an open
affair with his secretary, who, after being
caught, was then asked to find work elsewhere in
the company. After no alternative positions in
the company were found, the company asked for
and obtained her resignation. The former
secretary filed a sex discrimination claim
against the company. Dun & Bradstreet then asked
Brockmeyer to submit a report about the events
that led to the secretary’s discharge.
Brockmeyer refused and was fired, just days
after a settlement with the secretary.
Brockmeyer sued for wrongful discharge on the
grounds that the employer had a bad faith
motivation for his discharge. The court rejected
his claim, holding that good faith is not
required in employment termination decisions.
The court also clearly defined a public policy
exception to the rule permitting an at-will
employment to be terminated without a good
reason. The Wisconsin Supreme Court ruled an
employer may not discharge an at-will employee
if the discharge violates a clearly defined,
fundamental public policy of the state. In this
particular case, Dunn & Bradstreet’s actions did
not violate any clearly defined public policy.
This
narrow exception to the at-will rule was devised
in order to allow management to maintain control
over its business and to avoid frivolous
lawsuits. The employee making the claim for
wrongful discharge has the burden to identify a
specific provision of law that was violated by
the employer in consummating the discharge. The
burden then shifts to the employer who must
prove just cause for the termination. In this
case, Brockmeyer failed to show there was a
violation of a fundamental public policy.
In Wandry
v. Bull’s Eye Credit Union, 129 Wis. 2d 37, 384
N.W. 2d 325 (1986), the court provided a guide
for wrongful discharge claims premised upon a
violation of public policy. Wandry was
discharged for not reimbursing her employer the
amount of a stolen check she had mistakenly
cashed for a customer. In order to win on a
wrongful discharge claim, Wandry had to prove
she was protected by public policy from such a
dismissal. Wandry had to look at the Brockmeyer
case and follow some crucial steps to win.
First, she was required to identify a
fundamental and well-defined public policy
backed by statutory or constitutional law.
Second, she had to prove that there was a
violation of that policy in the discharge.
Wandry found a provision in the state statutes,
section 103.455, Wis. Stats., that protects
employees from employers who seek reimbursement
for work-related losses, though the exact
wording of the statute did not match Wandry’s
case. The court held that an employee who was
discharged for refusing to allow her employer to
deduct a business loss from her paycheck had a
valid cause of action for wrongful discharge.
The court
narrowed this public policy exception in Bushko
v. Miller Brewing Co.,134 Wis.2d 136, 396 N.W.
2d 167 (1986). In this case, Bushko complained
numerous times to management about the company’s
alleged unlawful acts of hazardous disposal,
safety policies, and record keeping. He
subsequently was fired and sued for wrongful
discharge under the public policy exception. The
court ruled that the exception did not apply in
his case because he was not asked or encouraged
to act or participate in the alleged illegal
acts. The court referred back to the Brockmeyer
case, noting that the public policy exception
applies only if the employer demands that the
employee contribute to an illegal act, and where
that participation is a condition of continued
employment. In this case, Bushko was merely
obeying the law and though his actions were
praiseworthy, he never was asked to partake in
the alleged misconduct.
It was
well established in the above cases that an
employee could not be fired for refusing to
violate the public policy of this state, as it
appears in the state constitution or a statute.
An unresolved question existed until 1992, as to
whether an employee could be fired for refusing
to violate an administrative procedure that
appears in the Wisconsin Administrative Code.
The public policy definition was expanded to
include administrative provisions as well, in
Winkelman v. Beloit Mem. Hosp., 168 Wis. 2d12,
483 N.W. 2d 211 (1992). Winkelman was a nurse
who had spent 16 years in the maternity ward
when she was unexpectedly ordered to "float" to
another department of the hospital unfamiliar to
her, where additional staffing was needed. She
refused to work in that area, believing that she
was unqualified to do work outside the maternity
ward, and went home. She was later informed that
her leaving constituted a voluntary resignation,
from which she could not be reinstated. She sued
for wrongful discharge, claiming the public
policy exception to the at-will employment
relationship, and cited a Wisconsin
Administrative Code section as support for her
recalcitrance. The cited section provided that a
registered nurse could be disciplined by the
licensing authorities for performing services
for which the nurse was not qualified, and that
such conduct constituted negligence. The court
upheld her refusal to accept the transfer to an
alien department for which she was untrained and
incompetent, and ruled that her discharge for
that reason was wrongful, in violation of
administrative code. The significance of the
case is the holding that where a fundamental and
well-defined public policy is evidenced by an
administrative rule, a discharge for refusal to
violate that public policy is actionable.
The
whistle-blower act of an employee, as in Bushko,
is a very narrow exception to the at-will
employment doctrine. The court in Hausman v. St.
Croix Care Center, 214 Wis. 2d 654, 571 N.W. 2d
393 (1997),
http://www.wisbar.org/Wis/96-0866.htm
distinguished its ruling from the holding in the
Bushko case in whistle-blower situations.
Hausman was a nurse at a nursing home. She
notified the administrators numerous times of
apparent neglect and abuse of patients. After
the management took no action, Hausman informed
a state official in charge of investigation of
nursing home practices, in accordance with
several statutes regarding abuse and neglect in
nursing homes. According to the statutes, nurses
were obligated to inform the state or local
officials in case of any such abuse. Moreover, a
nurse's failure to do so could result in
criminal sanctions or penalties. Hausman was
fired for having turned in her employer to the
state. She sued for wrongful discharge, claiming
the public policy exception. The court
distinguished this whistle-blowing case from the
Bushko case, noting that Hausman’s conduct went
beyond being merely praiseworthy, but was the
performance of a duty imposed by several
statutes, the avoidance of which would have
subjected her to criminal prosecution. The court
decided that compliance with legal obligations
is protected under the public policy exception.
Wrongful
discharge claims based on tort protect the
employees and promote good public policy. The
courts have warned companies that they may no
longer fire employees for any reason, namely
those violating public policy. In Kempfer v.
Automated Furnishings, Inc., 211 Wis. 2d 100,
564 N.W. 2d 692 (1997),
http://www.wisbar.org/Wis/95-0649.htm the
employee was fired after refusing his
supervisor’s order to drive a truck without a
commercial driver’s license. Kempfer had driven
it once before but had been advised by police
not to drive it again without the proper
license. When he informed his supervisor of the
importance of the license, his supervisor
ignored the warning and proceeded to demand that
Kempfer drive illegally. When Kempfer refused,
he was fired. He sued for wrongful discharge.
The court ruled that his case was within the
protection of the public policy exception set
forth by Brockmeyer, so he was awarded back pay
and reinstated.
In Tatge
v. Chambers & Owen Inc., 219 Wis.2d 99, 579
N.W.2d 217 (1998),
http://www.wisbar.org/Wis2/95-2928.htm the
supreme court held that an employer was not
liable for wrongful discharge when it fired an
employee because of the employee's refusal to
sign a non-compete agreement. The employee
claimed that the non-compete agreement was void,
as an illegal restraint of trade, pursuant to
Section 102.465, Wis. Stats., in that it did not
contain any geographical or durational
limitations as required by the statute. The
court did not believe that the statute created a
fundamental, well-defined public policy of the
state. Therefore, the employer was justified in
discharging the employee for his refusal to sign
the non-compete agreement, even though the
agreement was inconsistent with the statute. In
order to avoid making all restrictive covenant
cases wrongful discharge cases, the court
allowed the discharge for the employee's refusal
to sign, but commented that he could have
litigated the validity of the covenant if the
employer ever was sought to enforce it.
Contract
and tort laws have weakened the once strong
employment at-will doctrine to one that is now
more reasonable and fair to employees. These
cases and others have set forth the exceptions
to the rules while still upholding the
employer’s right to maintain control over the
company.
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